Paymate Signs Up IDBI Bank; A Look At Payment Co Tieups

Paymate has tied up with IDBI Bank, their 8th bank partnership in India. The company also has a presence in Sri Lanka, and recently powered services for a partner (Paybill) in Nepal. Paymate claims to have tie-ups with around 13,000 merchants. Interestingly, since Paymate uses the Interactive Voice Response service to verify payments, so they don’t necessarily have to have a tie up with telecom operators. 

Paymate competes with MChek, NGPay and Obopay in India. Do see our list of digital payment companies here. We compiled a list of their banking partners, based on what has been mentioned on their websites, and it does seem strange that HDFC Bank has tieups with MChek, Paymate and NGPay. How does this work - does the bank give customers an option to choose any one? Sure will be confusing for a customer.

Note that MChek has tied up with State Bank of India (SBI), which is India’s largest Public Sector Bank, ICICI Bank, India’s larges private sector bank, and HDFC, another large private sector bank, though I can’t quite understand what is going on with HDFC, given their multiple tie-ups. The following situations are possible in this ecosystem:

1. Bank has the consumer interface: the bank will then choose the payment company, and will have to tie up with all telecom operators
2. Telco has the consumer interface: the telco will choose the payment solutions company which will have to tie up with all banks
3. Payment company has the consumer interface: which means it will have to tie up with all the banks and all the telecom operators.
4. Free for all: utter confusion with either banks tying up with multiple payment companies and/or multiple telcos. The consumer doesn’t know where to go.  

Given the mobile banking guidelines, it appears that the bank has the consumer interface, and the onus is on the payment company to ensure telecom operator tieups. So it is likely that a bank will have only one payment company, and avoid confusion for the consumer. So what then is HDFC Bank doing?

Note (6th Jan 2008):  the table above has been updated, following inputs from Paymate that the company has signed up with Lakshmi Vilas Bank, and Tata Teleservices on the telecom front.

PayMate Powers PayBill Mobile Payments Services In Nepal; Why Not Direct?

Paymate, the Mayfield Fund, KPCB and Sherpalo ventures funded mobile payments company has announced the launch of its mobile payment services in Nepal through a local representative PayBill. Paymate appears to be providing the technology solution to PayBill, to enable consumers to pay for mobile recharge, pay utility bills, buy tickets, P2P money transfer, etc. PayBill has partnered with Nepals largest private bank Everest Bank and Nepal Telecom, the countrys largest telco.

Three months ago, when Paymate had announced plans to launch in Nepal, there was no mention of PayBill. According to Manish Kumar Subba, Founder and CEO of PayBill Pvt. Ltd, the project has been in the works for over 14 months.

Outside of India, Paymate has a presence in Sri Lanka, where it has a tie-up with Bank of Ceylon. Ajay Adiseshann, MD of Paymate had told Mint in September that the company expects overseas to contribute 12-15 percent of revenues by March. Their tie-up in Sri Lanka is a 50-50 JV, focused primarily on remittances.

State run Nepal Telecom has 2.2 million subscribers, and operates both GSM and CDMA services. PayBills services, like Paymates in India, are SMS based, though the PIN authentication for Giftmate (which I’ve used) is IVRS based. I do think there’s an issue with the number of PINs one needs to remember now - a separate PIN for the ATM, for Internet Banking and mobile banking. If the account is the same, shouldn’t the PIN be independent of the mode of access?

Update: Probir Roy, Founder of Paymate told MediaNama that Paybill brings to them the local relationships and infrastructure - Paybill is a bill payment gateway, much like Billdesk in India. Paymate hasn’t set up their own infrastructure in Nepal, and the service is being launched as PayBill, powered by Paymate.

Note: Do take a look at our list of Digital Payment companies in India, covering mobile payment, cash card companies, payment gateways etc. It’s still a work in progress, so in case we’ve missed any, leave a message, or write to nikhil@ medianama .com.

RBI Finally Takes Up The Issue Of Internet Wallets And Cash Cards In India

Finally.

Over two years ago, the Reserve Bank of India (RBI) put into cold storage, a Paypal-like service from by the Times of India Group called Wallet365. Wallet365 was essentially a pre-paid transaction instrument, much like Cash Card services like Itz Cash Card and Done Card, though with an Internet Wallet, you can withdraw money as well. There were concerns that you could start an account with just an email address, and Know Your Customer (KYC) norms were not being followed. More on why and how the RBI stopped the service, here.

Now RBI has finally taken up issue of “Pre-paid instruments”: they’ve published an “Approach Paper” and invited comments regarding “smart cards, magnetic stripe cards, internet accounts, internet wallets, internet purse, mobile accounts, mobile wallets, mobile purse and paper vouchers.”

We went through the Approach Paper, and noticed some issues:

– Not keen on Internet Banking? The RBI don’t appear to be very keen on Internet Wallets, though - to begin with, only banks will be permitted to  transfer funds online or using mobile phone networks.
– Limiting Use Of Cash Cards: Semi-Closed System Payment Instruments (Cash Cards) up to Rs 500 may be to be issued without any KYC subject to reporting of annual/suspicious transactions. Which means cash cards above Rs. 500 will require KYC verification. Remember that the average transaction amount for railway tickets using cash cards in August was Rs. 889.96, and a large number of users who don’t have bank accounts will be affected.
– Limiting Reloading Of Cash Cards: Semi-Closed System Payment Instruments (Cash Cards) may only be reloaded by debit to a bank account or using credit cards. What works for Cash Cards is that people can buy them from vendors or reload them by paying cash.

Download the approach paper here

Importance of This Regulation: 

(more…)

RBI Updates Mobile Banking Guidelines: Txn Limit Increased, Debit & Credit Cards Not Mandatory

1. Larger base covered: This is a key change. Mobile Banking can now be offered to customers of banks whether or not they have debit or credit cards. As per the earlier guidelines, it appeared that Mobile Banking was restricted only to debit/credit card holders with bank accounts. That’s the difference adding an “or” to section 2.1 has made.
2. Physical verification mandatory, but can be relaxed: In the earlier guideline as per section 3.1, “Banks shall put in place a system of document based registration with mandatory physical presence of their customers, before commencing mobile banking service.” There’s a loophole now, with the addition of the following sentence: “Reserve Bank would consider relaxation in specific cases while approving the proposals of banks.”
Our take: do away with a separate physical verification for mobile banking. Physical verification is done separately for opening a bank account and getting a mobile phone connection. Why a third verification for mobile banking?
3. Inter-operability Remains: this is a tough one. Beyond a period of six months, banks will have to offer the mobile banking service with all mobile operators, should the customer decide to switch operators. This has not been modified in the new guidelines.
Out take: While interoperability is desirable, it effectively puts banks at the mercy of mobile operators. For example, what if, hypothetically, Shyam Telelink does not tie up with ICICI Bank at the end of the six month period? With Airtel or Vodafone customers having signed up, will ICICI Bank have to shut down the services altogether? The interoperability clause, though well meaning, is not practical, and will have to be reviewed.
4. Transaction limit increased, but not enough: Customers are allowed to transfer funds of a maximum of Rs. 5000 daily, and purchase goods or services worth Rs. 2500. The earlier guidelines had imposed a per transaction limit of Rs. 2500, and an overall cap of Rs. 5000 per day, per customer.
Our take: Banks should be allowed to set their own transaction limits, depend on their risk perception of the customer. Why should the rules be any different from those for the Internet?
5. mPin encryption requirement relaxed: the requirement for an end to end encryption of the mobile PIN number (mPIN) has been relaxed. Earlier the end-to-end encryption was mandatory. Now it is just “desirable”.
6. Internet login IDs and Passwords can be used for mobile banking: the previous guidelines forbade the usage of Internet banking logins and IDs for mobile banking, thus making it necessary for users to remember/store both. That clause has now been removed.

Like we mentioned earlier - why should the guidelines for Mobile Banking be any different from those for Internet Banking…Just because the base is larger?

Download the new guidelines here.

Related:
- M-Banking Guidelines For India Issued; Ridiculous Transaction Limit
- “A Bank Account With Every Mobile Connection”; Stakeholder Comments On M-Banking Guidelines

“A Bank Account With Every Mobile Connection”; Stakeholder Comments On M-Banking Guidelines

Why should mobile transactions be treated any differently from Internet transactions? There isn’t a limit to online transactions that we know about, and a physical presence isn’t needed for opening a net-banking account. In our opinion, as long as pins aren’t stored in the handsets, or transmitted without encryption, there really shouldn’t be a difference in outlook.

The mobile banking guidelines issued by the RBI a couple of days ago have been deemed, politely, to be “Conservative”, and we contacted a few stakeholders from the mobile payments space for their perspective:

Probir Roy, co-founder of Paymate suggests that the registration process be made as simple as possible, and allow consumers to register remotely. The suggested ticket size of Rs. 2500 per transaction and Rs. is too small, and doesn’t make it convenient to pay bills; one can’t even pay for a Flight ticket with the mobile this way. He suggests that the banks should be given the freedom to set the limits. He contests the point we’d raised about issues with SMS based authentication, saying that there are other means of authentication. We’re told that Interactive Voice Response Systems (IVRS) is a probably a means of authenticating SMS based payments.

Vijay Balakrishnan, CMO of Obopay India adds that there’s an issue with mobile banking being allowed only for debit and credit card holders*, who only constitute 25 percent of the total bank account holders. The risk has been mitigated by the low transaction limits, though they want those an increase in those as well. They want restrictions on microfinance using mobile payments to be reduced. “The issue of no frills accounts becoming dormant or unprofitable for banks can be addressed systemically if MFI , banks and Mobile Payments companies can come together to create a viable and sustainable model in which micro loan repayments are done through the ubiquitous mobile device.”

Sanjay Swamy, CEO of MChek outlined what the banking fraternity might be missing out on: He believes that a bank account should be activated with every single mobile connection - the opportunity lies in adding 9 million accounts every month - with every single mobile connection, offer the customer the opportunity to open a new account as well. If there are significant KYC issues, then do a separate verification for the bank, and separate for mobile. The question should be - in the next 3 years, can we get 200 million customers in the banking system? That’s the number that will have cellphones in 3 years, and if we don’t implement this, the opportunity will be lost. The reasons to do it significantly outweigh the concern - give them a transaction limit of Rs. 1000 to begin with.

Even if you do the math on just the mobile bill payments, says Swamy, the opportunity is immense: with an expected 600 million mobile subscribers by the 2010, even at an ARPU of $5 (current ARPU is around $7), that’s still $3 Billion in just mobile bill payments per month, and much of that could go through the banking system.

Update: During the course of discussions, I also realized that it’s more likely that banks will tie up with a single payment service provider who offer services via multiple platforms, and have relationships with multiple operators, instead of each mobile operator dealing with only one payment service provider, who caters to multiple banks. I think both banks and mobile operators will resist the creation of a monopoly, with a single service provider works with all banks and all mobile operators.

Also keep in mind that these are initial guidelines, and the RBI is accepting comments. The final Policy is yet to be announced.

Related:M-Banking Guidelines For India Issued; Ridiculous Transaction Limit

Clarification On Eko Financial Solutions And Mobile Banking Userbase

A clarification from Abhishek Sinha, CEO of Eko Financial Solutions, on a story we had earlier done about sustainability of Mobile Payments. Sinha says that while they are leveraging the mobile, they’re not in the mobile banking space as such. The company is doing branchless banking under the Business Correspondent model and looking at the unbanked segment. Thus, the 20-25 million customer base he had mentioned to Mint was for their business as a whole, and not mobile specific.

From his comment to the earlier post:

“Eko is not clubbed along with Obopay, mChek, PayMate, ngPay. These players and similar others are looking at the banked customer base and adding value by giving efficient, secure and user friendly mobile interface for various banking and commerce needs. Eko is in the financial inclusion space wherein the model is entirely different. Here we see a potential to bank 400 million people in the next 5-7 yrs.

We are doing a pilot on Branchless Banking using Mobile Phones and Agent Model. We see that the need for domestic remittance will drive the adoption of service. Eko believes that it can facilitate this through a bank-led Business Correspondent model and offer many more services to the customers based on aggregation.

As our model is a bank-led model, we first give a bank account to the customer. Kindly have a look at the following video.

In the video, you will see basic user interface for people who may be just about number literate. Unlike the sophisticated interfaces offered by other players.

I hope this justifies the difference in the game, the customer segment and hence the size of the market for Eko.”

M-Banking Guidelines For India Issued; Ridiculous Transaction Limit

The RBI has issued a new set of operative guidelines for Mobile Banking in India, with changes based on comments from stakeholders. A couple of things significant in this set of guidelines:

Transaction limit
Transactions are limited to only Rs. 2500 ($55) per day, and Rs. 5000 ($110) per day, per customer. While this is an increase over the Rs. 1500 ($33) transaction cap and Rs. 2500 ($55) mentioned in the previous guidelines, it is still a very small amount. Take my example - My mobile phone bill is over Rs. 4000 per month, and I won’t be able to pay it using mobile banking services. This appears to a move to reduce the impact of fraud, since they’ve also asked banks to put a monthly transaction limit, based on the bank’s own risk perception of the customer.

Across Mobile Operators
The onus, clearly, is on the banks to ensure that customers across mobile operators have access to mobile banking services. They may restrict themselves only to one mobile operator for a period of six months. Two scenarios are possible in this instance:
– Either banks will have to partner with multiple mobile payment service providers, each of whom have access to different operators, or
– Mobile service providers will have to provide banks with access to different operators.
For example, MChek provides ICICI Bank, SBI, HDFC and Corporation Bank services only on Airtel in India. So either MChek will have to tie-up with all operators within six months, or these banks will have tie up with different service providers. One bank with many service providers faces an issue - it will confuse customers. It’s like having a different short code for a different operators.

Download the guidelines here
More issues with the guidelines: (more…)